SchemeGovernance

Scheme Records

The existing administrator will need to send us all the Scheme documentation and member files and we will establish our own records. We can also accept member data electronically to upload to our Profund database.

Valuation Process

Our Scheme year end is 31 December and all actuarial valuations are produced at this date. We will therefore need to change your Scheme year end if necessary and your next valuation will be the first 31 December within three years of the date of your last valuation to comply with the Pensions Regulator’s requirements.

Following the valuation date, the preliminary valuation results are discussed by the Cheviot Trustee in March and Cheviot and the Scheme Actuary then meet with the employer to discuss them during April and May. Covenant information, both in terms of the ability of the employer to withstand funding volatility and affordability of contributions, is an essential part of the process.

The Trustee reviews its policy on funding issues regularly. A funding policy sets out the Trustee’s general approach but is adapted to meet the situation of each individual scheme.

Accounts

We produce fully audited accounts each year. We will ensure that all assets are invested correctly and scheme payments are made promptly. We manage the Scheme bank accounts which are reconciled daily. Surplus balances will be invested fortnightly. We will liaise with your current advisers with regard to the payment of any outstanding invoices once we take over your Scheme and for the transfer of cash balances to Cheviot. Depending on the timing of your year end, your current adviser may need to produce a draft asset statement at the date of transfer.

Communications

We hold an annual Employers’ Day which covers current issues and investment matters.

You will receive a quarterly management information report from Cheviot providing details of investment asset allocation and performance, cash-flow information, membership information and funding updates. The funding updates are estimated but show the progress of your Scheme against your recovery plan in an accessible chart. A formal update from the Scheme Actuary is produced in the intervening years between valuations. The Scheme accounts will be produced at 31 December each year. Your members will receive an annual Summary Funding Statement and Cheviot’s Annual Report to Members which has some interesting and informative articles about pensions in general as well as information about Cheviot.

Governance Requirements

Cheviot takes responsibility for all governance requirements for the Scheme. You retain your responsibilities as employer, including paying contributions and levies in accordance with the Schedule of Contributions, agreeing valuations and recovery plans if necessary and responding to any consultation documents.

Covenant Reviews

Assessing the covenant of the employer and understanding its ability to make contributions and take investment risk is an essential part of Cheviot’s approach. We have an information protocol in place so it is clear what information is required from employers. Our current advisors will be in regular contact with your finance team. They work with employers to make it as easy as possible for them to provide the information the trustee requires and can usually just use management accounts which are already produced.

Confidentiality agreements can be put in place so that the covenant advisers only report their conclusions to the Trustee rather than the detail of your financial arrangements. Some important issues will be excluded from this and will need to be reported directly to the Trustee but this is usually only in exceptional circumstances.

Charges

Cheviot is a not for profit organisation so our costs are a share of our running costs, determined on a basis approved by the Trustee. We have negotiated reduced fees with all professional advisers. The Scheme will bear a share of all general professional fees (such as in relation to investment strategy) and any costs specific to the Scheme (e.g. valuation costs or rule changes).

You will received a quote from us of the fees for taking on your Scheme and an estimate of the ongoing costs of running the Scheme based on the number of members and the assets of the Scheme. A breakdown of charges is included in the quarterly management information.

An estimate of the ongoing costs of running the Scheme are usually included as part of the Schedule of Contributions. Expenses are deducted from Scheme assets and you receive quarterly VAT only invoices in respect of them. Most Schemes pay their contributions monthly. Some fees such as the PPF levy are usually paid direct by the employer.

Legislation Changes

Cheviot will deal with all changes in legislation and regulation, discussing the issues with employers if appropriate.

For example, you will have read about the 2014 Budget changes which will make income drawdown a more readily available benefit strategy for many members of money purchase schemes through the removal of the requirement to buy an annuity.

Cheviot introduced a post-retirement income drawdown service in 2013. This allows existing members, and anyone transferring to the Cheviot Trust at retirement, including from a final salary scheme, the choice of staying invested after retirement and taking a regular income from invested savings in a trust environment, rather than taking out an annuity with an insurer.

The introduction of the Cheviot option pre-empted the Budget change and puts us ahead of most schemes, reflecting Cheviot’s thoughtful and forward looking approach to issues being faced by members and employers.

It is not currently clear how the changes will affect members of your final salary scheme. The Government clearly cannot afford from a cash flow perspective to extend the proposals to public sector schemes but it is possible that members of private sector final salary schemes may be eligible. This could clearly change the cash flow profile of your Scheme significantly and potentially improve your funding position.

With a drawdown option already in place, Cheviot is ideally placed to support this change both for members and employers with a minimum of effort. Subject to the final regulations, members of your final salary scheme will have the option of transferring their benefits to our drawdown option at retirement with a minimum of paperwork and will then be able to access the value of their benefits in stages whilst leaving the remainder of their fund invested.